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6 Things Congress Should Do Right Now

By MOHAMED EL-ERIAN

March 17, 2014

Commit to pro-growth fiscal reform: U.S. companies are sitting on what some estimate to be $2 trillion of cash; and, with short-term interest rates floored, that money is earning very little at the bank. Why? Two main reasons (at least, two reasons that are under the direct and immediate influence of lawmakers): inadequate aggregate demand and uncertainty about the future path of tax and expenditure reforms. Instead of hiring more workers and investing in new plants and equipment, companies are giving more money back to shareholders. That’s good news for Wall Street and bad news for Main Street. There are many sensible ways to change this, from making the tax system less regressive to improving its growth impact along with expenditure reforms. Congress could promptly advance this agenda, along with immigration reform and the bilateral trade deals that have been stalled for months.

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Tackle long-term and youth unemployment: There is nothing worse for social cohesion than a lost generation of workers. Notwithstanding the sharp fall in the participation rate, an alarming number of the unemployed—3.8 million Americans, or 37 percent of the recorded jobless—are now long-term unemployed; an equally alarming portion—21 percent—of the 16-19 year olds in the labor force are without a job. The more protracted the problems of long-term and youth unemployment, the greater the risk that it gets embedded in the structure of the economy and becomes even harder to solve. A responsible Congress, working closely with the administration and the private sector, would take immediate action to overhaul America’s obsolete job-training programs and better prepare U.S. workers for the 21st-century economy. Down the road, proper education reform, one that prepares students for today’s globalized world and incorporates new innovations in teaching, is a must.

Unleash public-private partnerships: In January, with his creative initiative to help the long-term unemployed, President Obama demonstrated that government works best when it’s working hand in glove with the private sector. Yet the benefits of such win-win partnerships will remain small and isolated until Congress allows them to scale up. This can be done by revising the charters of certain government entities, modernizing financing instruments, pursuing social impact investment and celebrating the many wins rather than abuse the occasional failure—and inevitably there will be some failures—as ammunition for political attacks.

Restore America’s global economic leadership: A growing, more stable, balanced and inclusive global economy would do more than enhance domestic economic prosperity; it would also support U.S. national security. Yet Congress, as seen again by its recent delay of reforms to the International Monetary Fund that have been approved by virtually every other country, is holding back our constructive involvement in a better-functioning and safer world; it is also undermining America’s ability to lead and respond to crises. Congress would start by using the IMF legislation—which, by the way, involves no new funding from American taxpayers—as a springboard for much more meaningful multilateral reforms. There is no rational sense in making sensible IMF governance reform hostage to domestic political bickering.

These are just six of the many things that a truly responsible Congress would—and should—do, and quickly, to create jobs, help Americans prosper and counter the pressures on the country’s social fabric. One could easily add dozens more. But the point is that even a few moves can go a very long way toward enabling the United States to better meet its considerable economic potential. Will the next Congress finally get it?

Mohamed El-Erian is former CEO and co-CIO of PIMCO, chief economic adviser at Allianz and a member of its international executive board. He is chair of the president’s Global Development Council and author most recently of When Markets Collide. Follow him on Twitter at @elerianm.